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The Budget - 3 March 2021 - Taxes Practical

including Budgets
1nvest
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Re: The Budget - 3 March 2021 - Taxes Practical

#391961

Postby 1nvest » March 3rd, 2021, 7:21 pm

dealtn wrote:What happens if market interest rates move to 2% (or 5%, or ...)? Real yields turn positive?

All that cheap debt rolls over to expensive debt and your £20bn interest service cost goes to £40bn, or £100bn or ...

If it happens there isn't a magic solution to rid us of the debt. Somebody with less a than frugal consumption taste that takes out a credit card with a low "teaser" rate might not realise the folly of building up such an easily serviceable debt until the real rate kicks in. He might not be able to service it, or pay it back.

It's spread over time, many decades. 2Tn spread over 50 years, 40Bn/year average of deflated debt maturing each year that might be either rolled or repaid. Perhaps 20Bn or less in real terms. If interest rates at that time are high then strive to repay, otherwise perhaps roll. And a large chunk is held by the BoE who return all interest, could just give the gilts back to the treasury (write it off).

Paying down a debt secured at very low fixed rate/term sooner rather than later tends to be a higher cost compared to just letting it ride.

The debt as-is is fine. Primarily its deficit that is the priority, debt expansion rate, and at recent (pre-Covid) levels that was also fine. There's capacity to further expand the debt/deficit, and if directed towards investments (rather than wasted) that could pay big dividends, funded by negative real rate debt.

scrumpyjack
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Re: The Budget - 3 March 2021 - Taxes Practical

#391969

Postby scrumpyjack » March 3rd, 2021, 7:36 pm

It is all relative anyway and with most western countries in a worse debt position than the UK, there is certainly no urgency for frugality and hair shirts.

dspp
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Re: The Budget - 3 March 2021 - Taxes Practical

#391974

Postby dspp » March 3rd, 2021, 7:52 pm

Moderator Message:
Topic relocated due to many alerts about too much not TAX PRACTICAL. dspp

Lootman
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Re: The Budget - 3 March 2021 - Taxes Practical

#391980

Postby Lootman » March 3rd, 2021, 8:08 pm

I don't know if anyone else mentioned in but the creation of eight Freeport zones is exciting. One of them is even far from the sea!

PinkDalek
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Re: The Budget - 3 March 2021 - WAS ON Taxes Practical

#391982

Postby PinkDalek » March 3rd, 2021, 8:09 pm

Thanks to all those who attempted to keep on topic. Out.

JohnB
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Re: The Budget - 3 March 2021 - Taxes Practical

#391989

Postby JohnB » March 3rd, 2021, 8:26 pm

Why couldn't the political comments be deleted, rather than making the topic political?

PinkDalek
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Re: The Budget - 3 March 2021 - Taxes Practical

#392000

Postby PinkDalek » March 3rd, 2021, 8:48 pm

joey wrote:
PinkDalek wrote:Corporate tax ...
Thanks PinkDalek. I looked in all the Budget documents that were for download and couldn’t see the detail of the tapering either. ...


Have attempted an initial response back over at Taxes.

UncleEbenezer
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Re: The Budget - 3 March 2021 - Taxes Practical

#392009

Postby UncleEbenezer » March 3rd, 2021, 9:14 pm

Lootman wrote:I don't know if anyone else mentioned in but the creation of eight Freeport zones is exciting. One of them is even far from the sea!

We had Freeports until as recently as 2012. I understand reasons for getting rid of them included the fact that they just displaced (rather than created) economic activity, and they were big magnets for crime such as fraud as certain elements "gamed the system".

PinkDalek
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Re: The Budget - 3 March 2021 - Taxes Practical

#392045

Postby PinkDalek » March 4th, 2021, 12:04 am

Arborbridge wrote:
chas49 wrote:
JohnB wrote:TINNs???


Tax information and impact notes


Thanks for explaining. Another of those acronyms that appear fully formed in mid conversation without ever having been defined or in common usage here (or anywhere?)

It's like there's secret language people invent all of their own just to feel superior.


If you’d bothered to look at the full url I included, more than an hour before your interjection, you’d have seen what they were:

viewtopic.php?p=391827#p391827

They’ve been around since 2010 according to Tax Information and Impact Notes (TIINs) https://webarchive.nationalarchives.gov.uk/20130605075729/http://www.hmrc.gov.uk/thelibrary/tiins.htm and have been talked about regularly since then on both TMF & TLF.

I’m sorry that in my haste to type the OP, as the Chancellor was about to commence, I failed to type what TIIN stood for.

I really must do better.

NeilW
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Re: The Budget - 3 March 2021 - Taxes Practical

#392061

Postby NeilW » March 4th, 2021, 3:32 am

1nvest wrote:Interesting times. Debts that pay negative real yields, investors pay to lend to the Treasury - so are more like a Treasury asset. Blue turns red, red turns blue. All so Topsy turvy I no longer know left from right.


Once you close the loop you'll realise why.

What else were they going to do with their spare Sterling, since they can't get rid of it in aggregate?

If they spend it, then that causes taxation which eliminates the need to 'borrow'. Therefore for there to be any requirement to 'borrow' somebody must be saving Sterling.

Once everybody has completed all the portfolio shuffling via the asset markets so that the prices have risen to their indifference level, then whoever is left holding the Sterling has the following options.

(i) Put it in a Bank and stand the insolvency risk of investing in a bank without 100% deposit protection if they have more than £85K
(ii) Buy a Gilt
(iii) Draw out cash and stick it in the mattress and stand the storage risk
(iv) If they're an individual stick it in National Savings.

That then leaves the banks with any remaining Sterling, and they have a few more options.

(i) Leave it on deposit at the Bank of England, where they currently get 0.1%
(ii) Buy a Gilt
(iii) Buy a Treasury Bill at the weekly auction
(iv) Get into some tasty repo action with the Debt Management Office where they ... buy a Gilt or a Treasury Bill

There are no investors. What there are, are people with low risk appetites desperate for any safe return on offer - they are not rate setters, they are rate takers. Once you understand that, you can ask the obvious question. Why does government offer any interest at all? The worst that can happen is the Sterling will be spent, which is what we want to happen - since that creates activity, employment, profits and, yes, more taxation.

NeilW

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Re: The Budget - 3 March 2021 - Taxes Practical

#392062

Postby NeilW » March 4th, 2021, 3:51 am

dealtn wrote:What happens if market interest rates move to 2% (or 5%, or ...)? .


There is no such thing as market interest rates unless both the Bank of England and HM Treasury permit it. The Sterling money market is a rate taker, not a rate setter unless the authorities permit otherwise.

As the evidence of the past decade or more has shown, and the last year in particular.

We could save an awful lot of money simply by eliminating the entire charade. The experiment in monetary dominance has failed. All it does is aggrandise the banks and the finance industry and belittle the productive sectors.

A functional rule where government can only purchase what is spare in the economy and at below market price would be more than a sufficient control mechanism. The real economy can then always bid real resources away from government. Government is always crowded out.

NeilW

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Re: The Budget - 3 March 2021 - Taxes Practical

#392064

Postby NeilW » March 4th, 2021, 3:53 am

Lootman wrote:I don't know if anyone else mentioned in but the creation of eight Freeport zones is exciting. One of them is even far from the sea!


About as far as you can get since East Midlands Airport is near Derby.

Arborbridge
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Re: The Budget - 3 March 2021 - Taxes Practical

#392076

Postby Arborbridge » March 4th, 2021, 7:36 am

PinkDalek wrote:
Arborbridge wrote:
chas49 wrote:
Tax information and impact notes


Thanks for explaining. Another of those acronyms that appear fully formed in mid conversation without ever having been defined or in common usage here (or anywhere?)

It's like there's secret language people invent all of their own just to feel superior.


If you’d bothered to look at the full url I included, more than an hour before your interjection, you’d have seen what they were:

viewtopic.php?p=391827#p391827

They’ve been around since 2010 according to Tax Information and Impact Notes (TIINs) https://webarchive.nationalarchives.gov.uk/20130605075729/http://www.hmrc.gov.uk/thelibrary/tiins.htm and have been talked about regularly since then on both TMF & TLF.

I’m sorry that in my haste to type the OP, as the Chancellor was about to commence, I failed to type what TIIN stood for.

I really must do better.


I'm sorry for my laziness. I didn't think chasing down that link - it might have been a rabbit hole ;) The main thing that hit me in the eye was your uncommunicative jargon.

dealtn
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Re: The Budget - 3 March 2021 - Taxes Practical

#392087

Postby dealtn » March 4th, 2021, 8:24 am

NeilW wrote:
dealtn wrote:What happens if market interest rates move to 2% (or 5%, or ...)? .


There is no such thing as market interest rates unless both the Bank of England and HM Treasury permit it. The Sterling money market is a rate taker, not a rate setter unless the authorities permit otherwise.

As the evidence of the past decade or more has shown, and the last year in particular.

We could save an awful lot of money simply by eliminating the entire charade. The experiment in monetary dominance has failed. All it does is aggrandise the banks and the finance industry and belittle the productive sectors.

A functional rule where government can only purchase what is spare in the economy and at below market price would be more than a sufficient control mechanism. The real economy can then always bid real resources away from government. Government is always crowded out.

NeilW


When was the last time the BoE and Treasury didn't permit it? The sterling money market is, and I continue to believe will continue to be the rate setter.

The evidence of the last decade is exactly that. The BoE has not been a rate setter, other than base rate. All other rates have been set by the market.

We could run the experiment of eliminating the charade. It will be interesting, and the relative value of the £ would be discovered quite soon under a new regime. Any realistic chance of that regime change happening? Any political party suggesting abolishing the Gilt market as policy. Any economists? Even MMT enthusiasts I reckon wouldn't propose it.

You trust a government, any government, to understand when there is spare capacity, when that is exhausted, when economically it is better, even if not politically, to act in such fashion?

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Re: The Budget - 3 March 2021 - Taxes Practical

#392094

Postby Gengulphus » March 4th, 2021, 8:38 am

Arborbridge wrote:... I didn't think chasing down that link - it might have been a rabbit hole ;) ...

You didn't actually need to chase down the link - just looking at it properly reveals:

https://www.gov.uk/government/collections/budget-2021-tax-related-documents#tax-information-and-impact-notes

I do realise of course that actual link text is often uninformative - but it does prove useful often enough that I find it worth at least casting a quick eye over it.

Gengulphus

Arborbridge
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Re: The Budget - 3 March 2021 - Taxes Practical

#392105

Postby Arborbridge » March 4th, 2021, 9:02 am

Gengulphus wrote:
Arborbridge wrote:... I didn't think chasing down that link - it might have been a rabbit hole ;) ...

You didn't actually need to chase down the link - just looking at it properly reveals:

https://www.gov.uk/government/collections/budget-2021-tax-related-documents#tax-information-and-impact-notes

I do realise of course that actual link text is often uninformative - but it does prove useful often enough that I find it worth at least casting a quick eye over it.

Gengulphus


OK I didn't notice amongst the address of the link that there was concealed the answer to my question. I'm stupid, lazy, dumb, however you want to characterise it: maybe just human?
But the fact remains that creeping acronyms and abbreviated forms in general are a menace and help to make language less transparent rather than more. Language is the art of communication and if people want to communicate they do so more effectively by making their language more transparent rather than obscure. We aren't here to set or play guessing games.
We all use abbreviations within a context where they are well known and understood (for example the HYP community uses "HYP" or "VOD" because everyone in that group knows what it stands for): that is acceptable. But what too often happens is that an acronym drops in out of the blue - it's happened at least twice recently - and then people start wasting time pondering on what it means and where it was first mentioned, rather than understanding the conversation.
There's no excuse for it and at least two of us were baffled, with no doubt several others who didn't like to raise the point. Those people will be less likely to ask questions (on any subject) and find out in future, if others belittle them for doing so.

Arb.

NeilW
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Re: The Budget - 3 March 2021 - Taxes Practical

#392117

Postby NeilW » March 4th, 2021, 9:24 am

dealtn wrote:
When was the last time the BoE and Treasury didn't permit it? The sterling money market is, and I continue to believe will continue to be the rate setter.


They haven't been permitting it for ten years - hence QE. And of course base rate setting artificially maintains the Bank Rate above zero, which is where it would drop to naturally in a pure market under excess reserves (since banks can't get rid of them in aggregate).

April 9th last year on the three month bill is the best example of expectational control of rates. But the whole of QE over the last decade here and three decades in Japan is the same. It's yield curve management. The central banks will drain bond issues until the price goes up to where they want it, which forces the yield down - because everybody ends up with floating rate debt (ie Sterling) they can't get rid off in aggregate and they fight each other for what is left since the alternative is 0.1% overnight.

QE is setting interest rates higher up the yield curve than overnight.

You trust a government, any government, to understand when there is spare capacity, when that is exhausted, when economically it is better, even if not politically, to act in such fashion?


You don't need to trust them, and neither do you need to trust unelected wonks in a central bank ivory tower who have proved just as useless. You can do it all automatically. If the government is purchasing off the floor then they won't be able to buy anything if the private sector wants it, since the private sector will just pay more for it and the government won't up their bid - because Parliament has banned them from doing so.

It's entirely driven by the current desires of the private sector, but guarantees that nothing remains unused - particularly the unemployed. That leads to greater GDP and greater output for any given interest rate. More profit, more investment, more automation (because "what about the jobs" no longer matters, ie no more bailouts of firms that should die), more productivity and a greater standard of living. Much better than debt millstones around people's necks.

It's just an automatic stabiliser system, and those have been in place for the thick end of a century now. If government wants anything else then it has to stop it being bought - which means raising the necessary taxes to remove the private sector's purchasing capacity. And justifying that to the voting population.

If the private sector doesn't like the amount government is spending then it can control that itself. Just bid it away from government and spending will automatically reduce.

The functional rule is far more direct mechanism for controlling government spending than messing around setting interest rates.

And that then leads to the Sterling exchange rate. For those who don't believe in functionalism to leave, those who do have to come in. And the latter are the ones with the money, particularly in the Silicon Valley fraternity. Why would they not pick up British assets while they are going cheap, when they know there is going to be a demand boom due to the stabilisers?

That's just a market operating. The old guard with their out of date beliefs lose money, and the new people who understand how stocks and flows work make money. It's just a transfer from the old to the young - as needs to happen.

NeilW

dealtn
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Re: The Budget - 3 March 2021 - Taxes Practical

#392124

Postby dealtn » March 4th, 2021, 9:32 am

I think I am at the point of losing the energy to engage with you.

What you describe is the "market" working, being allowed to work, having been allowed to work for a very long time, all in an argument that it isn't the market, ending with a quote "That's just a market operating".

yorkshirelad1
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Re: The Budget - 3 March 2021 - Taxes Practical

#392140

Postby yorkshirelad1 » March 4th, 2021, 9:53 am

billyfreezer wrote:March 23rd is the key day for CGT announcements or property tax or wealth tax...etc
No idea why it's separate from the Budget, but it is.


+1

chas49
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Re: The Budget - 3 March 2021 - Taxes Practical

#392152

Postby chas49 » March 4th, 2021, 10:18 am

Arborbridge wrote:
Gengulphus wrote:
Arborbridge wrote:... I didn't think chasing down that link - it might have been a rabbit hole ;) ...

You didn't actually need to chase down the link - just looking at it properly reveals:

https://www.gov.uk/government/collections/budget-2021-tax-related-documents#tax-information-and-impact-notes

I do realise of course that actual link text is often uninformative - but it does prove useful often enough that I find it worth at least casting a quick eye over it.

Gengulphus


OK I didn't notice amongst the address of the link that there was concealed the answer to my question. I'm stupid, lazy, dumb, however you want to characterise it: maybe just human?
......


Moderator Message:
Guys - this discussion isn't really on-topic for the Taxes board. I think you've made your points, so perhaps it's best dropped now? Thanks (chas49)


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